• • •
Hence the program in which Morris began enlisting Hamilton and other congressional nationalists in 1782. Pennsylvania only epitomized, by legalizing, a problem of all the states, which, as far as Morris was concerned, had habitually robbed private creditors by pandering to the people’s movement and paper finance. Now states were robbing those same investors, in their function as public creditors, by failing to collect cash taxes for requisitions to Congress, with which Morris wanted to fund bonds.
Morris’s plans for repairing the situation involved such things as a central bank, privately financed by Morris and his friends, and the issuing of large-denomination notes backed by his own credit, “Mr. Morris’s notes.” He insisted on states’ paying their requisitions not in what they had—state paper and actual army supplies—but in the bank’s notes, or in Mr. Morris’s notes, or in coin.
But his main goal was to get Congress to lay a 5 percent tax, called an impost, on all imports countrywide. And the impost was only a wedge. Once people were inured to direct federal taxation, Morris told Hamilton and other followers, cash poll taxes, cash land taxes, and cash excises would soon follow. To ensure payment to the creditors, Morris intended to open, as he put it, the purses of the people. That those purses were almost always empty of the metal he wanted did not faze him.
He faced stiff opposition to a national tax. Taxing power was sovereign power. Although Morris, Hamilton, and the nationalists hoped to slip the federal impost through Congress as just one more revenue bill—it took only nine states to ratify such measures—the state legislatures recognized the tax bill as a fundamental amendment to the Articles of Confederation by which the Congress had been formed. Amendments required the unanimous approval of the member states. Morris deployed his team to seek support in the states for revising the Articles. Hamilton went home to New York; the governor called a special session of the assembly at Poughkeepsie, and Hamilton’s father-in-law, Philip Schuyler, introduced resolutions that Hamilton had written. When the legislature passed those resolutions, Hamilton distinguished himself for the first time as a nationalist politician. Soon Congress seemed on the verge of amending its Articles and creating the impost.
Morris and his team kept the pressure on. Another part of the Morris plan, critical to enabling Hamilton’s later projects, was to swell the federal debt to massive proportions. A sufficiently huge debt, Morris believed, would force the Congress to pass federal taxes, and while the best thing would have been for the central government to assume responsibility for the states’ bonds and paper as well, Morris could calculate Congress’s debt alone at an astronomical number. Another $8.5 million in bonds had been offered for sale, far less appealing than the first tier, because interest was paid in Continental paper. When its currency finally collapsed, Congress started issuing these bonds in lieu of payment to merchants and big army suppliers. The bonds depreciated more slowly than currency, and to induce their acceptance as payment, Congress and army agents overpaid in them. A class of speculator lower than Morris’s friends, yet ultimately crucial to his plans, bought and traded this type of bond.
Morris also had his eye on a controversial, incalculably large chunk of debt, scattered in slivers and shards: IOUs from Congress and the army to small farmers and artisans who supplied army goods. There had been no refusing to sell to armed troops: People who readily complied got more chits; those who argued got few or none. States passed laws to seize crops deemed excessive of the needs of families, and who was issuing a chit, the state or the army, wasn’t always clear to a coerced seller. In face value, ordinary citizens of Pennsylvania held perhaps $20 million in forced loans, with similar amounts in New York and New Jersey. As the war moved south, Virginians complained of being ravaged by impressment. The total may have reached $95 million. But face value seemed meaningless: nobody expected Congress to pay on these things. Pockets were stuffed with them. After 1780, some states accepted them for taxes, but their purchasing power was pennies on the dollar.
Morris wanted Congress to call in all of those chits and exchange them—at face, not the low market value—for interest-bearing bonds. Speculators would buy the chits in bulk, at the market rate of pennies on the dollar, from desperate people ignorant of the deal. Exchanging chits at face value for bonds, speculators would create huge profits for themselves and a massive addition to the national debt. To pay it, Congress would have to collect a federal tax, in coin, from the very people who had been forced by the army to take paper IOUs, and had then sold them, at an extraordinary discount, to people with inside information. Proceeds would be earmarked for making tax-free interest payments to bondholders.
With debate on the impost raging in Congress, Morris applied maximum pressure, using a counterintuitive tactic: he suspended interest payments on the first tier of bonds, those mainly owned by his friends and associates. If Congress wouldn’t raise the money through a federal tax, top bondholders wouldn’t get paid. Morris rightly predicted clamor. Influential creditors came to his office; he told them his hands were tied. Talk to Congress, he advised. Get the Articles revised to allow the impost; demand federal laws prohibiting states’ populist legal-tender laws, price-control regulations, antimonopoly rules. Do it high-mindedly, he coached them: invoke widows, orphans, patriotism. Bondholders followed his advice, but they started pressuring their state legislatures too for payment, and the states threatened to start paying off their own citizens’ federal debts. This was a problem for Morris. Such a system, which could only be accomplished with fancy bookkeeping and yet more paper, would defeat his plan to concentrate all public finance under federal control. Alexander Hamilton went back to New York. At a bondholder meeting in Albany, with Schuyler presiding, Hamilton urged the lobby not to seek redress from states. The prime directive was to demand federal taxes. Bondholders’ sights must remain trained on Congress.
As a result of Hamilton’s and others’ efforts, a congressional committee did finally agree in principle not just to the impost but also to federal poll taxes, land taxes, and an excise. The nationalists felt crushed, therefore, when Rhode Island’s delegate to Congress decried the impost, railing against loss of state sovereignty and painting a picture of the states chained together like prisoners under a tyrant. The Rhode Island legislature voted not to relinquish its sole right to tax its citizens. Virginia learned of Rhode Island’s refusal and pulled out too. Morris and the nationalists veered toward despair. The worst thing was that peace was in the air. The end of war would remove Congress’s incentive to control the states at all. A tide of rotten state paper would wash away the financiers’ investments, placing the debt effectively in default.
So Morris now began defining the purpose of the war as sustaining the war debt. Only extending the military conflict, he said, could hold the country together long enough for the government to grow strong and the people resigned to paying national taxes. He wrote to General Washington, who was near exhaustion and hoping for a permanent vacation, to suggest that more fighting would be better than peace for producing necessary funds and increasing the authority of Congress. For all his commitment to nationalism, Washington chose to ignore that suggestion. He had more immediate problems to deal with.
As if by providence, Washington’s biggest problem gave Bob Morris, Alexander Hamilton, and the nationalist coalition an opportunity to swell and strengthen the bondholding class by adding to it a new lobby that seemed, literally, irresistible: the army. In the winter and spring of 1783, through a series of events that came to be known as the Newburgh crisis, Morris brought his career as superintendent of finance to a climax and Hamilton dove with immense brio, for the first but by no means the last time, into the riskiest kind of power politics. The nationalists would emerge from the Newburgh crisis with matters arranged to enable what would one day become Hamilton’s whiskey tax. In the process, Hamilton and Washington discovered new elements in their relationship that would, in the 1790s, influence their response to tax resistance at the
Forks of the Ohio.
• • •
Mutiny was what Washington most feared. War was effectively won, and in late 1782 his army, anything but happy and relaxed, was arrayed about the rolling hills on the Hudson River near Newburgh, New York, in a large winter cantonment. The past seven years had been a slog through cold, starvation, at times near-nakedness, along with the daily horrors of slaughter. The oppression continued in Newburgh. Neither officers nor men had been paid in years. Washington himself was near bankruptcy. He blamed Congress. Uncertainty about pay was haunting—and uniting—a large, angry force, 550 officers and around 10,000 enlisted men, who might refuse to be sent home impoverished and in debt.
Throughout the fall of 1782, officers at Newburgh pumped themselves up over what they could do if they wanted to. A group led by Washington’s enemy, General Horatio Gates, who thought he should be commander in chief, plotted mutiny and takeover of Congress. Loyal officers were angry too, and Washington worked with them, persuading them to put their grievances in a petition to Congress.
Henry Knox, Washington’s irreproachably loyal artillery general, wrote the petition and sent a letter to the Congress’s secretary of war to prepare him for its arrival. The way the petition arrived, in January of 1783, made clear how serious it was. A major general and two colonels delivered it and then settled into Philadelphia to wait for the only response they seemed prepared to accept.
The great opportunity for Bob Morris and the nationalists in Congress came with the officers’ main demand, which had to do with pensions. Congress had tried to make up for lost salaries with a promise that when the war was over, officers would receive half pay for life. With the army now about to disband, and no money in Congress, officers couldn’t see how the promise would be honored. The officer emissaries from Newburgh were therefore demanding that Congress commute lifetime half pay into a lump sum of cash, payable right now. They’d accept it either from the Congress or from the officers’ individual states.
Within a day of their arrival in Philadelphia, Morris met with the three officers unofficially and hailed them as fellow creditors. He urged them not to look to the states for payment: the only solution was to demand federal taxes to pay not just officers but all creditors. The officer class, unlike the nationalists in Congress, was armed. Morris advised the officers to refuse to lay down their arms unless the states agreed to federal taxes.
When the officers met with Congress they did mention mutiny as the probable outcome of demands not being met. They also wrote to Knox at Newburgh, urging him to take the lead in an outright refusal to disband unless states agreed to federal taxes. Knox didn’t reply. Bob Morris, his assistant and fellow financier Gouverneur Morris (who was no relation), and Alexander Hamilton now determined to build the situation into a genuine crisis. That the crisis really might end in coup and military government was a risk they had to take. They even considered the potential benefits to their national agenda of the success of such a coup. But their main idea was merely to frighten the states with the threat of military takeover.
The Morrises and Hamilton reached out to the generals up at Newburgh. Gouverneur Morris wrote to say that if the army stuck with its insistence on a national tax, the states would have no choice but to agree to it, and he wrote again to Knox to urge him to lead: if the generals, so to speak, took the hill, Gouverneur assured Knox, the nationalists in the Congress would, so to speak, supply them. Robert Morris had a connection with the mutinous cabal led by General Gates: the two men most deeply in personal debt to Morris were Charles Lee, another enemy of Washington, and Gates himself. While it would have been safer for the conspirators to rely on Knox, they kept Gates, a more dangerous tool, whom Hamilton especially disliked and disrespected, at the ready.
The risks Hamilton was taking, at this early and critical moment in his career, called for immense daring and agility. Nobody despised Gates more than Hamilton’s father-in-law and mentor Schuyler, whose shock and disgust, should he ever learn of Hamilton’s collaboration in sedition, would be catastrophic. The trickiest part for Hamilton lay in his main assignment: to work on General Washington, whom the conspirators wanted either leading the threat of military coup or somehow neutralized. Approaching Washington, finesse would be everything. Hamilton and Washington had already caused each other difficulties.
At twenty-two Hamilton had more or less appointed himself chief of the general’s staff, and Washington had come to rely on the brash, almost preternaturally accomplished young man, and had given him, under the pressure of the British invasion of Philadelphia, the job of requisitioning supplies from terrified citizens, which Hamilton had brought off with striking tact. The two had worked late, side by side, preparing dispatches and orders. Hamilton referred to headquarters, where he was called Hammy, as home; Washington called his staff a family. There were parties and outings and Martha Washington named her tomcat Hamilton to tease the young staffer about his success with women. Some had felt that the youth exercised too great an influence on the commander in chief. Hamilton, for his part, was eager for exploit and battlefield command; he saw opportunities for fame dissolving while he did desk work, but Washington needed him too much to let him go. Hamilton also suffered with ordinary staffers Washington’s displays of frustration. The general couldn’t expose his temper beyond the family and took it out on subordinates behind closed doors.
One day at headquarters Washington and his chief of staff passed on the stairs. Washington said he needed to speak to Hamilton. Hamilton continued downstairs and delivered a note. Then he spoke with the Marquis de Lafayette. When Hamilton did go up, Washington met him at the top of the stairs, furiously accusing him of disrespect. Hamilton said that if Washington felt that way, they must part; Washington acquiesced in what he called Hamilton’s choice; the two men stalked off. An hour later, the general sent a message apologizing for ill temper and asking Hamilton to come speak to him. Hamilton sent a message back. He saw no purpose in a conversation, he said. His mind was made up about leaving; if Washington insisted, of course Hamilton would speak to him, but he preferred not to.
This high-handedness stunned everybody, not least Schuyler. But Hamilton told people privately that for all the incense the world burned for the great man, working for him was hell. The general had always wanted greater closeness between them, according to Hamilton; he’d been forced, he said, to rebuff Washington’s advances and keep their relationship military and professional. Washington’s generalship too, Hamilton confided, wasn’t all it should be. Still, the general’s popularity, he conceded, had been essential to the country and might still be useful.
After leaving the staff, Hamilton didn’t shrink from bugging Washington repeatedly, in letters, for the high command he felt he was owed. Finally, with the war nearly over, Washington gave Hamilton command of a battalion, and at Yorktown, after much pleading from Hamilton, the general made the young man’s dream come true. He sent Hamilton’s light infantry on a classic charge. The brigade emerged all at once from a trench, guns unloaded and bayonets fixed, and ran, screaming horribly, through flying lead, handily capturing a critical position. Hamilton had daydreamed about such an achievement since his days on the St. Croix docks.
Now, to bring off the Newburgh crisis, Hamilton surprised his former boss—they hadn’t been closely in touch—with a friendly letter of unsolicited advice, subtly inviting Washington into the conspiracy. Congress was out of money, Hamilton reported. There would be no army payments; sadly, troops would be justified in staying armed. The general’s admirable integrity, Hamilton said, and delicacy about exploiting a powerful position, might be viewed by some—Washington’s own officers, Hamilton hinted—as obstructing progress toward getting paid. Mutiny was in the air. How much better if Washington, instead of discouraging attempts at redress—Hamilton stage-whispered by underlining—took direction of them?
When Washington responded, his tone was remote, disturbed, full of good judgment. He fully endorsed the goal of national t
axation and a strong federal government, without which everything he and the country had gone through would be for nothing. Yet he wouldn’t, he said, give in to fear of mutiny. He knew all about Gates, but he hoped instead for better elements in the army to prevail. Things were calm at Newburgh, he reported.
Calm at Newburgh wasn’t what the conspirators wanted. Hamilton continued a delicate correspondence with Washington; the Morrises finally sent a personal emissary to Knox, who did speak at last. No, Knox said. The army’s threatening the states with refusal to disband would be highly improper. With no support from a legitimate leader, the conspirators turned to General Gates, sending him word that the financier and the creditor class would support whatever he decided to do.
Gates’s people began circulating anonymous memos among officers in the Newburgh camps, attacking Washington’s moderation on the pay issue and calling an unofficial meeting to discuss officer grievances. At that meeting, Gates and his crew expected to take over the army.
In Congress, meanwhile, James Madison, a nationalist not included in the scheme, noted the positive effect that fear of coup was having on tax debate. Hamilton again and again addressed the body to rule out compromises. He opposed a motion to levy the impost only for paying officers: all bondholders must be included. Excitement, Madison noted, led Hamilton to expose the real agenda, depicting for Congress the glories of a United States woven together by a system of tax collectors. Meanwhile, General Arthur St. Clair, a Morris ally and debtor, was working on the officer emissaries, urging them to consider taking commuted half pay in interest-bearing bonds. This would fully cement the officers’ might to the bondholders’ goals. Should the officers refuse to accept payment in bonds, Robert Morris threatened them through St. Clair, they might get nothing.
The Whiskey Rebellion Page 5